Skating through nuclear winter

The mood was grim, taken at face value, at the Wireless Communication Alliance’s annual Venture Capital panel, held in conjunction with the Wireless Communication Association’s symposium, in San Jose on Wednesday, 5 November 2008. VCs were saying things like “nuclear winter” and “survival is the new growth”. It sounded like they were concentrating on keeping their existing portfolio companies alive, rather than investing in new ventures. The two exit routes they rely on — acquisitions and IPOs— are largely blocked right now, so they’re marking time.

One thing they did say they’d look at: a new start up with a name-brand team, one that has delivered home runs for VCs in the past. New as in today new, not last week new. They said that talent can be had cheap in this market, and they’re keeping their eyes out for bottom feeding opportunities. Although they didn’t exactly put it that way — VCs have good table manners. Usually.

But even they saw some bright spots out there. Well, maybe dark grey spots amid the generally black outlook. Taken together with the rest of the day’s discussion, there are some trends that will lead to new market opportunities, sooner rather than later:

Laptops are a mature product that will peak in not too many years and then start to decline. The buzz these days is around small form factor, low power, thin client, specialized devices that do the things people want to do in the specific way they want to do it. My predication: laptop penetration will flatline in three years in the U.S. and five years worldwide. Within ten years, laptop market penetration will begin to drop, and will be a quaint niche within twenty years.

Oh, you say, laptops are simply a computer form factor determined by the acuteness of the human eye and the dexterity of human say. True. But already in the pipeline: voice input input, gesture based input via mobile phone-sized cameras and inertial sensors, micro projectors that display phone and other mobile device output on walls or whatever, video eye glasses, video-enabled contact lenses and other heads up display technologies. And then there’s the stuff we haven’t even heard of yet. Laptop keyboards and screens will go the way of the rotary phone dial and mechanical signs.

Netbooks are booming right now — Intel’s Atom processor is a runaway hit. We might even see the return of the mobile phone — i.e., something you just use to talk to other people, maybe via VoIP as well as cellular systems, with text messaging hanging on as a legacy app. Watch for personal networked cameras, too, that double as scanners and other input devices.

How about health monitors? Think of the rig doctors give to heart patients to record vital signs for a day or two. Replace it with a cigarette lighter sized, wireless enabled device you just put in your pocket or clip on your belt, forever more. It sends out vital sign info in real time, all the time, to a computer that analyses it and alerts you and your doctor whenever something changes for the worse. Your body heat recharges it, so you don’t even have to plug it in at night.

The list goes on, but small, networked, mobile devices are going to be a booming market. The new ClearWire is betting its business model on it. So are a lot of other wireless players.

Another buzzword getting huge play right now is “cloud computing”. The heavy processing in this networked, device-rich world will be done by remote servers somewhere on the Internet. That will be particularly true for the types of applications that people use laptops for today. Computing services — storage, processing, applications, you name it — are just another utility. In the dawn of the manufacturing era, companies generated their power (electrical, steam, whatever) onsite. Not any more. The same will be true of computing.

If you think security is a big issue for laptops and desktops, you ain’t seen nothing yet. With all your data flying around, inside and out of the cloud, people and companies who know how to secure it will be hot beyond belief.

Another comment from a VC yesterday: the OS kills apps. In other words, the hotter a standalone application, the likelier that functionality will be integrated into the OS and eliminate the market for the app. Security is at or near the top of the list. The Mac OS already has disk encryption features, and their services-based business model is probably only a year or two away from jumping head first into that space. Microsoft is making big noises about the cloud — they even released a version of Windows optimized for it. Laptops are yesterday’s news for their developers, but I don’t think they have much of a clue about mobility and the cloud.

If you can make an elevator pitch like “we secure mobile devices, in and out of the cloud”, you might be able to score some capital, even during this nuclear winter. The VCs yesterday identified security and enterprise focused mobility services as a sector they might still consider. Companies like Intel are looking to boost demand and corner it while they can.

Times are tough now. No question. But there’s a huge difference between impossible and merely difficult. Doing mobile devices, services, and connecting technology and systems are very difficult right now. Which is very good news.